The Finance Ministry is expected to issue 10-year treasury bills in Lebanese denominated currency with 8.25 percent interest and another issue in Eurobonds in October of this year.

The Finance Ministry is expected to issue 10-year treasury bills in Lebanese denominated currency with 8.25 percent interest and another issue in Eurobonds in October of this year.

Al-Markazia news agency said Central Bank Governor Riad Salameh notified the Association of Banks in Lebanon about the two new issues during its last monthly meeting.

Sources said the subscription in the 10-year bonds was just one of a series of steps taken by the Central Bank to raise the interest to more than 8 percent.

They added that most Lebanese banks have refrained from subscribing to the short- and medium-term T-bills because the yields on them are too small and therefore not very appealing to investors and lenders.

The average yield on T-bills is around 5-6 percent.

The government and the Central Bank have lowered the interest rates on T-bills in line with those on the international markets.

The drop in interest rates has also allowed the Finance Ministry to reduce the cost of debt servicing, and thus the budget deficit has become more manageable.

Bankers are expected to snap up most of the new issue because the yield is too tempting to resist.

However, the sources did not disclose the value of the 10-year bond.

Sources added that the Finance Ministry had no intention of asking banks to market the new issue.

Successive governments have been tapping the local and international markets to finance the public debt, which now stands at around $55 billion.

Lebanese commercial banks held around LL25.129 trillion up to July of this year after dropping to LL24.849 trillion at the end of 2011.

The Eurobonds held by Lebanese banks up to July of this year totaled $12.67 billion.

Economists and international investment banks expect the Lebanese Cabinet to resort to more borrowing to finance the controversial salary scale that will cost the treasury more than $1 billion a year.

Most ministers do not support Finance Minister Mohammad Safadi’s plan to raise the value added tax from 10 percent to 12 percent and hike taxes on interest on deposits from 5 percent to 7 percent.

For this reason, the Cabinet may be compelled to borrow more from the market, although it realizes that this measure would negatively impact the budget deficit.